Agility: The Key to Survival of The Fittest in The Software Market

Agility: The Key to Survival of the Fittest in the Software Market

Introduction

The software industry and IT departments are facing extreme pressures to provide new applications that add value in today's competitive environment. Whereas in the 1990's companies concentrated on implementing systems that re-automated functions to provide specific benefits (the ability to process transactions on January 1, 2000), today's market demands new applications, and better integration within and between organizations. This has sparked the formation of many software companies to solve new problems, and well-established application providers are looking for new features and business models to improve their revenue streams.

Concurrently, there has been a significant increase in the number of small, interconnected organizations who are working to provide emerging services and products to today's customers. These firms have different information needs than large firms. They often provide a limited number of products or services so their information needs may be simpler. However, they often work in concert with many other firms to complete projects, so they need the ability to communicate seamlessly within this web of firms to share information about each project. In response to traditional and emerging markets, software vendors are realizing they must satisfy the needs of a wide range of companies and to develop applications tailored to each niche.

Facing these changes, those needing to evaluate applications are often faced with a daunting task of understanding key differences among software packages and attempting to identify the major players within each market segment. To facilitate such analysis, we have developed a framework that organizes software applications similarly to the evolutionary categorization of animals. In this framework, analogous to the vertebrate/invertebrate classifications, enterprise systems can be distinguished as those that have been created without an organizing principle while others are either inwardly organized or outwardly organized. Figures 1 and 2 show the comparative evolutionary trees for animals and enterprise systems.

Each category of enterprise system can be sub-divided, and each species of system can be studied to identify (1) the characteristics that can lead to its continued existence and (2) the niches in which it can flourish. This structure can provide several benefits. First, those interested in purchasing software can use this categorization to identify the key differences among systems currently available. Second, software vendors and customers may use this framework to highlight today's software market trends with an eye toward guiding organizations toward tomorrow's software choices. Finally, we have successfully used this framework to design a graduate course to introduce students to a wide range of software applications and prepare them to enter the market in which agility is the key to survival.

II. Developing the Framework: The Evolution Analogy

The ideas of Darwinian evolution can be used to describe the tumultuous IT environment in which enterprises compete. As illustrated in Figure 1 for animals, a first pass at natural classification produces the three categories of (a) invertebrates, (b) vertebrates, and (c) a speculative category of how animals interact as communities. In Figure 2 a similar first pass categorizes enterprise systems into (a) systems with no overall organizing rationale (i.e., with no backbone), (b) systems with inward organization (i.e., can be likened to vertebrates), and (c) systems with outward organization (i.e., able to communicate and interact as communities). Each of three information system categories is explained below and can be further subdivided, as shown in Figure 2.

Insert Figures 1 and 2 here

Systems with no organizing rationale: Invertebrate animals such as insects are not as advanced biologically as their vertebrate counterparts, but they survive well in a multitude of environments. Similarly, single entry enterprise systems can be successful in guiding a multitude of small organizations. However, these systems are not able to provide robust classification principles to guide the recognition of transactions. QUICKEN ™ is an excellent example of such a system that has found a niche and is flourishing within that narrow segment— individual users and very small businesses in which the owner is the key participant and decision maker. These systems work well when the owner or manager participates in all of the key business events. However, they face survival problems if the organization has significant transaction volumes, reporting requirements, or outside information users. For example,